commentary

(Los Angeles Business Journal)

September 26, 2005

Katrina Shows Supply Chain Needs National Attention

by David S. Ortiz and Henry H. Willis

In its destruction of the Port of South Louisiana, Hurricane Katrina severed an important link in the supply chain that brings products from around the world to America and sends U.S. products abroad. An earthquake, other natural disaster or terrorist attack in Southern California could sever similar links at the twin ports of Los Angeles and Long Beach, with even more dire consequences.

The Port of South Louisiana is the fifth largest in the world and a key part of America's supply chain. The ports of Los Angles and Long Beach together create the third busiest port complex in the world and are the nation's critical economic connection to Asia.

Right now, the twin ports are operating at capacity. The L.A.–Long Beach complex and its nearby refining infrastructure provide much of the gasoline used in the southwest United States. Last October, congestion off the coast forced the diversion of more than 100 ships to alternate ports, and last July congestion forced ships to wait up to 10 days to unload cargo. If a natural disaster or terrorist attack were to cripple key infrastructure – roads, rails and pipelines – linking the ports to the rest of the United States, the economic consequences would be immediate and significant.

The supply chain that includes the Louisiana and California ports is something few of us think about, but depend on nevertheless. The supply chain consists of ships, ports, railroads, planes, pipelines, highways and trucks that have created a global superstore to meet our needs. It makes it possible for an American family to buy gasoline produced from Middle Eastern oil, fruit from lain America and clothing products from throughout the United States and ship those products abroad.

But America's supply chain is operating without national coordination and direction. Though the consequences of disruptions are abroad, each is considered a local event. The federal government and the private sector should work together to prevent future disruptions and respond to those that occur.

As a first step, the United States needs to evaluate how disruptions and government policies affect the economy nationally and locally, and how those policies can be adjusted to minimize disruptions.

Next, government needs to invest in strengthening the supply chain infrastructure.

Third, government decisions about the supply chain should examine a range of interrelated infrastructure, commerce and security issues. Advanced and developing nations rely on expanded global trade, creating both new resource requirements and security issues.

Finally, the federal government should provide assistance and advice to port operators, shipping lines, truckers, and railroads about technology development and deployment designed to protect the supply chain.

The disruption Katrina caused to the flow of goods will contribute to its economic damage, and should motivate us to strengthen the supply chain in the future.


David Ortiz and Henry H. Willis are researchers at Rand Corp.

This commentary originally appeared in Los Angeles Business Journal on September 26, 2005. Commentary gives RAND researchers a platform to convey insights based on their professional expertise and often on their peer-reviewed research and analysis.